DeFiIntermediate

Concentrated liquidity

An AMM design that lets liquidity providers allocate assets within chosen price ranges.

PLAIN-ENGLISH DEFINITION

In more detail

Concentrating liquidity can make a position more useful for trades within its selected range, but it makes range choice important. When the market moves outside the range, the position generally stops earning trading fees until it becomes active again and can be held in one asset. The funds haven't vanished; their composition and activity changed.

IN THE WILD

How you might use it

“Why did my LP stop earning fees?” The market price moved outside your selected range, leaving the position inactive.

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By Crypto Dictionary · Published · Updated

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